Cathay General Bancorp's Q1 2025: Unraveling Key Contradictions in Deposit Rates, Loan Growth, and Margin Strategy

Deposit rates and margins, interest rate sensitivity and loan portfolio composition, loan growth expectations and customer behavior, deposit cost strategy are the key contradictions discussed in Cathay General Bancorp's latest 2025Q1 earnings call.



Earnings and Financial Performance:
- Cathay General Bancorp reported net income of $69.5 million for Q1 2025, a 13.3% decrease as compared to $80.2 million for Q4 2024.
- The decrease was primarily due to an increase of $10.7 million in provision for income taxes due to an increase in the effective tax rate.

Loan and Deposit Trends:
- Total gross loans decreased by $23 million, or 0.5% annualized, with decreases in commercial and residential loans offset by increases in CRE and construction loans.
- Total deposits increased by $131 million, or 2.7% annualized, driven by net increases in core and time deposits.

Margin and Interest Trends:
- The net interest margin increased to 3.25% for Q1 2025 from 3.07% for Q4 2024.
- Interest recoveries and prepayment penalties added 6 basis points to the net interest margin, compared to 4 basis points in Q4 2024.

Tariffs and Loan Impact:
- Based on a survey, customers moved sourcing away from China, with about 1.4% of total loans potentially impacted by proposed tariffs.
- The company is closely monitoring the evolving tariff situation and its impact on borrowers and the loan portfolio.

Capital and Share Repurchase:
- The company repurchased 876,906 shares of common stock at an average cost of $46.83 per share for $41.1 million, completing its $125 million share repurchase program.
- The company is awaiting regulatory approval for a new buyback program.